Abhijit Banerjee, Emily Breza, Esther Duflo, Cynthia Kinnan, 30 March 2020

The idea of poverty traps being important for microenterprises is captured in the adage “it takes money to make money”. This column reports on a study following households in India exposed to different levels of microfinance. The findings reveal that microfinance has potentially transformative impacts for some entrepreneurs – especially those who without it were stuck in a poverty trap. However, for other households the effect is very small, suggesting that microlenders should consider more screening of households in order to provide some larger loans.

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